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Labour Minister Pushes for Crackdown on Undeclared Work in Cyprus

The Labour Minister of Cyprus has announced a concerted effort to tackle the widespread issue of undeclared work, which has long been a challenge for the Cypriot economy. To formalise the labour market and safeguard workers’ rights, the Ministry is pushing forward new measures aimed at cracking down on employers who engage in illegal employment practices, including failure to declare workers, pay fair wages, or contribute to social security.

The campaign, which is part of a broader government initiative to enhance labour rights and ensure compliance with employment laws, seeks to address both the economic and social impact of undeclared work. With undeclared employment affecting a significant portion of the workforce, particularly in sectors such as construction, hospitality, and domestic services, the Labour Ministry has made it a top priority to enforce stricter regulations and penalties.

Undeclared Work: A Persistent Challenge

Undeclared work, often referred to as the “shadow economy,” is a global issue that has long plagued Cyprus. It encompasses a range of illegal employment practices, including the hiring of workers without contracts, underpayment of wages, and failure to contribute to social insurance schemes. For years, such practices have not only deprived workers of their legal rights and protections but also cost the government millions in unpaid taxes and social security contributions.

In Cyprus, the problem has been particularly pronounced in sectors that rely heavily on seasonal or informal labour. Construction, tourism, agriculture, and domestic services have been identified as industries where undeclared work is more common, with many workers vulnerable to exploitation due to lack of proper oversight or enforcement.

According to government estimates, undeclared work in Cyprus accounts for a considerable portion of the labour market. This not only weakens workers’ protection but also creates unfair competition between businesses that follow the rules and those that cut costs by circumventing legal employment obligations.

Stricter Enforcement and Penalties

To address these challenges, the Labour Ministry is introducing stricter enforcement mechanisms, including more frequent inspections of workplaces, harsher penalties for employers found violating the law, and enhanced cooperation between government agencies responsible for labour and tax compliance. Employers who are caught engaging in undeclared work may face heavy fines, legal action, and, in some cases, closure of their businesses.

The Ministry also aims to strengthen workers’ awareness of their rights through information campaigns. By educating workers about their entitlements, including the right to minimum wage, insurance, and other legal protections, the government hopes to reduce the number of people falling victim to exploitative practices.

Moreover, the use of digital tools to track employment data and improve transparency within the labour market is also part of the government’s long-term plan to combat undeclared work. These technological measures are expected to make it easier for authorities to detect and address violations more efficiently.

Cyprus Hits Historic Tourism Peak As Overtourism Risks Mount

Record-Breaking Performance In Tourism

Cyprus’ tourism sector achieved unprecedented success in 2025 with record-breaking arrivals and revenues. According to Eurobank analyst Konstantinos Vrachimis, the island’s performance was underpinned by solid real income growth and enhanced market diversification.

Robust Growth In Arrivals And Revenues

Total tourist arrivals reached 4.5 million in 2025, rising 12.2% from 4 million in 2024, with momentum sustained through the final quarter. Tourism receipts for the January–November period climbed to €3.6 billion, marking a 15.3% year-on-year increase that exceeded inflation. The improvement was not driven by volume alone. Average expenditure per visitor increased by 4.6%, while daily spending rose by 9.2%, indicating stronger purchasing power and higher-value tourism activity.

Economic Impact And Diversification Of Source Markets

The stronger performance translated into tangible gains for the broader services economy, lifting real tourism-related income and overall sector turnover. Demand patterns are also shifting. While the United Kingdom remains Cyprus’ largest source market, its relative share has moderated as arrivals from Israel, Germany, Italy, the Czech Republic, the Netherlands, Austria, and Poland have expanded. This gradual diversification reduces dependency on a single market and strengthens resilience against external shocks.

Enhanced Air Connectivity And Seasonal Dynamics

Air connectivity has improved markedly in 2025, with flight volumes expanding substantially compared to 2019. This expansion is driven by increased airline capacity, enhanced route coverage, and more frequent flights, supporting demand during shoulder seasons and reducing overreliance on peak-month flows. Seasonal patterns remain prominent, with arrivals building through the spring and peaking in summer, thereby bolstering employment, fiscal receipts, and corporate earnings across hospitality, transport, and retail sectors.

Structural Risks And Future Considerations

Despite strong headline figures, structural challenges remain. The European Commission’s EU Tourism Dashboard highlights tourism intensity, seasonality, and market concentration as key risk indicators. Cyprus records a high ratio of overnight stays relative to its resident population, signalling potential overtourism pressures. Continued reliance on a limited group of origin markets also exposes the sector to geopolitical uncertainty and sudden demand swings. Seasonal peaks place additional strain on infrastructure, housing availability, labour supply, and natural resources, particularly water.

Strategic Investment And Market Resilience

Vrachimis concludes that sustained growth will depend on targeted investment, product upgrading, and continued market diversification. Strengthening year-round offerings, improving infrastructure capacity, and promoting higher-value experiences can help balance demand while preserving long-term competitiveness. These measures are essential not only to manage overtourism risks but also to ensure tourism remains a stable pillar of Cyprus’ economic development.

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